Published PapersJain, Ankit., Tantri, Prasanna., Thirumalai, Ramabhadran S. (Forthcoming) "Demand Curves For Stocks Do Not Slope Downwards: Evidence Using an Exogenous Supply Shock", Journal of Banking and FinanceRead Abstract >Close >We analyze the price impact of an exogenous share sale by inside blockholders, who were forced to sell a part of their shareholdings due to a regulatory change in India. The affected firms experience a negative excess return of 4.5% during the issue week. Crucially, the price impact reverses in about 55 to 75 days after the event. Our results are consistent with the view that the long term demand curves for stocks are at: a view echoed by classical finance theories. The short term price reaction to a sale is likely to be a result of temporary price pressure.

Published PapersSarkar, A., Subramanian, Krishnamurthy., Tantri, Prasanna. (Forthcoming) "Effects of CEO Turnover in Banks: Evidence Using Exogenous Turnovers in Indian Banks", Journal of Financial and Quantitative AnalysisRead Abstract >Close >We examine the effect of CEO turnover on earnings management in banks. Since banking is intrinsically an opaque activity, we hypothesize that an incoming CEO of a bank is more likely to manage earnings than a counterpart in a non- financial firm. To identify the hypothesized effects, we exploit exogenous variation generated by age-based CEO retirement policies in Indian public sector firms. Com- pared to banks where there is no turnover, banks experiencing CEO turnover report 23% lower profit-to-sales and 25% lower return-on-assets in the transition quarter. This decrease occurs due to increased provisions, though such provisions do not associate with increased non-performing assets subsequently. Shorter CEO tenure exacerbates earnings management by the incoming CEO. The stock price declines by 1%, and lending is 2% lower than average, which highlight the real effects of earnings management by incoming CEOs. In contrast to banks, we observe no earnings management coinciding with CEO turnover for other public sector firms. As evidence of motivation, we show that earnings management increases likelihood of directorship positions in other firms within two years of retirement.

Published PapersTantri, Prasanna. (2018) "Contagious Effects of a Political Intervention in Debt Contracts: Evidence Using Loan-Level Data", The Review of Financial Studies, 33 (11), 4556–4592
Published PapersMurphy, Dermot., Thirumalai, Ramabhadran S. (2017) "Short-Term Return Predictability and Repetitive Institutional Net Order Activity", Journal of Financial Research, 40 (455-477)Read Abstract >Close >Half-hour returns are predictive of same half-hour returns in subsequent days. Using a unique dataset that provides masked trader identification and trader type, we find that the half-hour net order submission activity of institutional traders is positively and significantly associated with same half-hour returns on subsequent days, and that this relationship subsumes the return predictability in shorter intervals. We hypothesize that institutional net order activity is predictive of returns either because of repetitive order submission activity across days, or because of the slow diffusion of information that is initially revealed by institutional traders. Our evidence supports the former hypothesis.

Published PapersKapoor, Mudit.,Jagannathan, Ravi.,Ernst Schaumburg. (2013) "Causes of the Great Recession of 2007-9, The Financial Crisis is the Symptom not the Disease", Journal of Financial Intermediation, 22 (1), 4-29Read Abstract >Close >Globalization has brought a sharp increase in the developed world’s labor supply. Labor in developing countries – countries with vast pools of underemployed people – can now more easily augment labor in the developed world, without having to relocate, in ways not thought possible only a few decades ago. We argue that the large increase in the developed world’s labor supply, triggered by geo-political events and technological innovations, is the major underlying cause of the global macro economic imbalances that led to the great recession. The inability of existing institutions in the US and the rest of the world to cope with this shock set the stage for the great recession: The inability of emerging economies to absorb savings through domestic investment and consumption due to inadequate national financial markets and difficulties in enforcing financial contracts; the currency controls motivated by immediate national objectives; and the inability of the US economy to adjust to the perverse incentives caused by huge money inflows leading to a breakdown of checks and balances at various financial institutions. The financial crisis in the US was but the first acute symptom that had to be treated. A sustainable recovery will only occur when the natural flow of capital from developed to developing nations is restored.

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